Australia: I'll see you in Court – four things to consider before litigating

As a business owner or manager, you are probably faced with a number of issues every day that seriously test your resolve. Disputes with your customers, suppliers or landlord can often 'snowball', and, unless you act quickly to resolve the problem, you may find yourself in a situation in which your business is at risk of suffering a significant loss.

When something goes wrong that causes a loss to your business - either a loss of income or a loss of ongoing custom and reputation - it is easy for emotion to take the place of reason and for you to immediately want to do everything within your power to take the party responsible for that loss to the proverbial cleaners!

The Courts do provide an invaluable framework for disputes to be resolved. However, in the commercial environment, a decision to litigate should be measured, considered, and re-considered - and certainly not made lightly. Litigation can be a long and drawn out process that can involve the expenditure of significant legal fees with absolutely no guarantee of recovering your money.

In certain circumstances litigating is the best option, however that decision should not be made without considering at least the following four key criteria:

  1. Have you tried to negotiate?

Clients often come to us with a commercial dispute and they are 'out for blood'. They are angry, emotional and in many cases feel wronged by the other party involved.

The first question we always ask them is "have you tried to negotiate the dispute?" The response received is often along the lines that one, or in most cases both, of the parties are too stubborn to compromise their respective positions.

This is where a reasonable, ethical legal practitioner can add real value. Sometimes it's not the terms of an offer that a party objects to, rather it is the messenger that obstructs a reasonable settlement. In our experience, we have often found that a little 'prompt' from the lawyers will encourage the other party to come to the table. Then, if an agreement can be reached, it can be properly documented in writing with the correct terms.

It is always best to consult an experienced legal practitioner before taking any steps to resolve a dispute. A legal practitioner can help you see the dispute from an objective perspective, and the bigger picture in terms of how far you want to take the matter.

  1. Debt v Return

At the outset of a dispute it is easy to say you are willing to spend "thousands of dollars" in recovering a debt. When emotions are running high, principles seem to be all that matters. But as the old adage goes 'principles can be expensive'.

Litigation can be expensive and drawn out. Before beginning the Court process you should:

  1. Sit down with a legal practitioner to gain a better understanding on the possible cost of the Court process;
  2. Map out how much you are willing to spend on litigation; and
  3. Whether that expenditure is comparable to the amount you are seeking to recover.

If the figures don't add up to your satisfaction then you should either consider settling early for a compromised amount, or in certain circumstances where the debt is not significant, possibly even writing it off.

  1. Can you afford to spend the time?

Aside from looking at the dollars and cents you will be spending you should also consider the amount of time that needs to be dedicated to litigating a matter. Business owners and their staff will be required to spend considerable time with their legal representatives communicating instructions, checking progress and discussing strategy. This is especially true in the evidence stage of litigation.

This all takes away from productivity that can be dedicated to the business and a lot of times managers and business owners don't give a value or even consider this expenditure before commencing proceedings. The result is a massive shock (including but not limited to your bottom line) when your staff are spending more time in your lawyer's office than at your own.

  1. Judgment does not always mean a cheque

When a client comes to me and wants to commence proceedings, one of the first things we consider is whether, if successful, we can turn a judgement into a cheque.

Regardless of whether you have a certificate of judgement; if you are forced to wind up a company or bankrupt an individual you run the risk of obtaining a lesser sum than the judgement debt, or not receiving anything, all the while increasing the expenditure of your legal costs.

There are certain mechanisms the Courts have made available to a litigant to protect them from this occurring, but serious consideration should be given to a party's financial position before commencing proceedings against them.

Where does that leave you?

Ultimately this list is not exhaustive and every matter has its own specific issues that need to be considered and dealt with. Nevertheless, the decision to litigate should be given the same amount of scrutiny as a decision to invest in any other commodity.

Legal practitioners are able to assist you in planning the best route possible to recovering a debt or dealing with a dispute - one that will increase your chances of spending the least amount of money and time, and ultimately getting the best return on your investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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